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Scott Musser, current National Auctioneer Association President, said recently:

    “I think in five years that 50 percent of auctions will be online only.”

This got me thinking, “Why?” Why would an auctioneer not offer live bidding, or phone bidding, or absentee bidding, and require bidders participate only online?

The thinking must be that an online only auction is more beneficial for the client? Or, at least it better be the thinking, and not that it is just better, or easier, or more profitable for the auctioneer. See: https://mikebrandlyauctioneer.wordpress.com/2009/11/18/what-do-auctioneers-owe-their-clients/

An online only auction requires that each item is adequately photographed, described in sufficient detail and posted on an online bidding platform with sufficient time to attract interest and allow bidding.

Too, all the items must be secured until after the auction is over and until payment is complete. Some buyers expect shipping which typically requires additional labor, supplies and cost. Other buyers agree to pickup their purchases, and therefore those arrangements must be scheduled and coordinated with the client.

And, real property is certainly sold at auction. In cases where online bidding is used, many more pictures, descriptions, and disclosures are necessary, as the line between patent and latent facts becomes blurred. What is patent in person is often latent when only looking at a picture.

In the case of real or personal property, typically, an online bidder pays a meaningful buyer’s premium and so is the auctioneer’s additional profit earned at the detriment of the client? See: https://mikebrandlyauctioneer.wordpress.com/2009/12/16/buyers-premium/

While Mr. Musser apparently feels this is a positive change in the auction industry, I wonder:

  • If online bidding is prudent, why not accompany online bidding with live bidding, phone bidding, and other methods of bidding to even further enhance participation and prices?
  • Can a live auction with one-on-one personal contact with bidders many times result in more money for the client than the more passive, third-party method of online bidding?
  • Is not the focus of a bidder much more vested at a live auction, where that bidder is present, in person, rather than literally a mouse click away from leaving an online only event?
  • Would not a online only auction bidder appropriately expect the likelihood of a shill bidder, plant, or other secret price support scheme to be in place against them than at a live event? **
  • Doesn’t the live auction allow bidders to literally see other bidder’s interest, and gauge their own accordingly, often resulting in more aggressive participation?
  • Why is online bidding necessary at all? Any bidder, anywhere on earth, can place absentee bids with almost any auctioneer, and/or bid by phone?
  • Does not the shift in liability from the bidder actually seeing the item, and it being sold “as-is,” and “where-is,” to a bidder being able to rely, legally, upon the auctioneer’s description, open the client to additional risk?
  • Is the lure of directing everyone to bid online due to a betterment of the client’s position, or a desire of the auctioneer to earn additional buyer’s premiums?

** Shills, or “potted plants”, are sometimes employed in auctions. Driving prices up with phony bids, they seek to provoke a bidding war among other participants. Often they are told by the seller precisely how high to bid, as the seller actually pays the price (to himself, of course) if the item does not sell, losing only the auction fees.

Shilling has a substantially higher rate of occurrence in online auctions, where any user with multiple accounts (and IP addresses) can shill without aid of participants. Many online auction sites employ sophisticated (and usually secret) methods to detect collusion

The United States Federal Trade Commission notes that the most frequently filed complaints to their office involve online auctions. They dedicate a page on their website concerning such: http://www.ftc.gov/bcp/edu/pubs/consumer/tech/tec07.shtm

Can online bidding be beneficial for a client? Certainly. There are many auctioneers around the country and throughout the world conducting online auction events (online only, and online in conjunction with a live event) and realizing good results.

Online bidding allows bidders from anywhere in the world to see the item, read the auctioneer’s description, and bid via a computer. Some events allow the auctioneer to be viewed and heard on screen, further simulating the feel of “being there.”

How should auctioneers consider online bidding?

First, does it produce a better net result for the client? And, this isn’t always about money … does it result in the items being removed by any certain deadline (or a closing by a certain deadline,) and/or does everything get removed? How do additional holding costs erode online bidding profits? How long does the client have to wait for their money, and is that wait manageable? Is the additional liability outweighed by the additional online benefit?

For an auction in a part of the country or area where live bidders would not be expected to participate, an online only event may be reasonable. However, if live bidders are willing to participate, leaving the live component out of the auction would likely be to the determent of the client.

I would suggest the following:

  • If an auction can be held live, and attract a sufficiently large attendance, online bidding capability is probably unnecessary
  • If an auction can be held live, and attract a sufficiently large attendance, but the client would benefit from additional online bidding, then online bidding capability would be prudent
  • If an auction would likely not produce much of a live audience, online bidding capability could be viewed as essential, although considerations should include even a marginal benefit from any live bidders
  • If an auction cannot be held live, considering location, parking, display, or client’s wishes, then an online only auction should be considered

Will 50% of all auctions be online only by 2015? Should they be? I don’t think so.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.face book.com/mbauctioneer. He is Executive Director of The Ohio Auction School.